The economy is in great shape ... on paper

On paper the Australian economy is in great shape. With unemployment at around 5.1 per cent, inflation at 2.2 per cent, and GDP growing at 4.2 per cent, our economy is the envy of the world.

Why, then, is there much pessimism out there? Why is consumer confidence at an all-time low? Why is the Government not getting credit for saving us from the global financial crisis? Why are we not grateful for the position we are in, particularly given how the rest of the world is faring?

The answer is as simple ... life isn't lived on paper.

A saying made famous by the American author Mark Twain is relevant: "There are three kinds of lies. Lies, damned lies, and statistics." The point being, of course, that numbers don't tell the whole story. Or, you can find a set of numbers to back up just about any point of view.

And these are good numbers. Unemployment of 5.1 per cent, steady inflation and economic growth over 4 per cent makes for an attractive set of figures. But this hides the fact that huge parts of the economy and population are struggling with some of the worst trading conditions in living memory.

During the decade or so leading up to the GFC in 2008, households in Australia spent more than they earned. They did this because the two biggest assets most people own, their home and their superannuation, were increasing rapidly in value.

So what's the big deal if the credit card is maxed out - the house we bought for $200k last year is now worth $350k. Let's just refinance the house, draw another twenty grand or so, pay the credit card off, and go on a holiday to Bali. Maybe get a higher value card when we get back.

We had the confidence to spend and live above our means because house prices and superannuation were increasing. But as soon as that changed, we realised we had overdone it. When the tide goes out, you can see who has been swimming naked.

And plenty of us were. Australians got drunk on debt, and with every party comes a hangover. We are now right in the middle of it. Australians are currently saving an unprecedented 10-12 per cent of their income, paying down debt or leaving the money in a savings account. This is a massive withholding of cash from the economy.

But there are plenty of important people telling us that everything is OK. That we should be grateful. That we are much better off than the people in Greece.

Wayne Swan and other senior government figures tell us we shouldn't be so determined to see the glass as half empty. So to do people like Glenn Stevens, the head of the RBA. But these people live in a different world - the intangible world of graphs, spreadsheets, lies, damned lies and statistics.

There are other worlds that are insulated from the economy on a day to day basis. For teachers and nurses and other public servants, their jobs are not dependent on consumer demand. They quite rightly may not see what the fuss is about, and would probably agree with Wayne Swan that we are going well.

But those of us in the private sector live in a different world. We live in a world where 30 per cent or more of consumer demand has disappeared. The business owners and corporate managers certainly see it. But so do the workers. Sure, they may not see the balance sheet, but they can see the effects.

The forklift driver that used to unload eight trucks a day now only unloads five trucks, and has lost his overtime. The retail worker sees the dust gathering on the stock on the shelves. The café worker shuts the shop early because they haven't had a customer in three hours.

When people see this happening in their jobs at the same time their houses are depreciating in value, it's little wonder they are pessimistic.

As with all hangovers, the last thing anyone wants to hear when they are in the middle of it is that it's their fault. Or even worse, that it's not even real and things are really going well.

People don't want sympathy, or handouts. They just want to know that the government understands the concerns and want them to not make it worse. They want clear, sensible, stable government that does no harm.

Time is a healer, and the private sector just needs to try and do its best to survive until the consumer confidence returns.

As with a real hangover, all you need to do is be sensible for a while and in time it will pass. But Wayne Swan and other government figures are just reinforcing how ridiculously out of touch they are with the concerns of most Australians when they tell us that everything is fine.

Shane Watling is production manager at plantation timber sawmill Wespine Industries and a member of the Liberal Party. View his full profile here.

EDITOR'S NOTE: Some of the facts in this article have been disputed. See 'Making up facts' here.